MicroStrategy Announces $400 Million Note Financing, $284.5 Million Bitcoin Impairment Charge

MicroStrategy (NASDAQ: MSTR) this morning announced that it intends to raise US$400 million via the issuance of senior secured notes due 2028 to buy bitcoin. This is despite the firm this morning noting in an 8-K that it filed with the SEC that the firm would be facing significant writedowns as a result of the fluctuations in the price of the cryptocurrency.

The senior secured notes are expected to be offered in a private offering to institutional buyers. The notes are to be fully secured by MicroStrategy Services Corp, a subsidiary of the company. Notably, the company evidently is looking to protect its current holdings, with the debt to be secured by future assets of MicroStrategy, but not its existing bitcoins or bitcoins and digital assets purchased from the proceeds of existing bitcoins.

In short: the company is looking to compartmentalize its debt risk. The firm reportedly holds 92,079 bitcoins as of today, which are to be held in a new subsidiary, entitled MacroStrategy LLC.

Proceeds from the placement are to be used to acquire additional bitcoins.

This is notable, given that the company this morning also indicated that it intends to take significant impairment charges for the quarter ended June 30, 2021, with an estimated charge of $284.5 million. The charge is directly related to the decline in the value of the firms bitcoin holdings over the three month period. The loss follows a $194.1 million impairment taken during the first quarter related to bitcoin holdings.

For the three months ended March 31, the company reported digital holdings valued at $1.95 billion, which was funded by $1.66 billion in secured notes.

MicroStrategy last traded at $477.32 on the Nasdaq.

Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Leave a Reply